Special Drawing Rights (SDRs) :
SDR is a reserve asset (known as ‘Paper Gold’) created within the framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a part of countries official Forex reserves along with gold, reserve positions in the IMF and convertible foreign currencies.
Merchant Banking :

• Merchant Banking is a combination of Banking and consultancy services.


• It provides consultancy to its clients for financial, marketing, managerial and legal matters.

Money Laundering :
The process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.
Prime Lending Rate (PLR) :
The rate at which banks lend to their best (prime) customers. It is usually less than normal interest rate.
Bancassurance :

• Bancassurance simply means selling of insurance products by banks.


• Bancassurance is used to describe the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products.

Balance of Trade:

• The value of a country’s exports minus the value of its imports.


• Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.

Balance of Payments:

• A list of all of a country’s international transactions for a given time period, usually one year.


• Payments into the country (receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negative numbers called debits.

Liquidity Adjustment Facility (LAF):
Liquidity adjustment facility is a tool used in monetary policy that allows banks to borrow money through repurchase agreements.
Demat Account:
The term demat, in India, refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debentures.
GAAR:

• It is General Anti-Avoidance Rules.


• Tax Avoidance is an area of concern across the world.


• The rules are framed in different countries to minimize such avoidance of tax.


• It is a set of general rules enacted so as to check the tax avoidance.

BPLR:

• BPLR means the Benchmark Prime Lending Rate.


• It was made applicable normally only on the loans which have been sanctioned before the introduction of Base Rate (i.e. July 2010).

Base Rate:
The Base Rate is the minimum interest rate of a Bank below which it cannot lend, except for DRI advances, loans to bank's own employees and loan to banks' depositors against their own deposits. (i.e. cases allowed by RBI).
Prime Lending Rate (PLR):

• The rate at which banks lend to their best (prime) customers.


• It is usually less than normal interest rate.

Bridge Loan:

• A loan made which is done by a bank for a short period to make up for a temporary shortage of cash.


• Bridge loan mainly covers the period between the buying the new and disposing of the old one.

Open Market Operations:

• An open market operation is an instrument of monetary policy which involves buying or selling of government securities from or to the public and banks.

NOSTRO Account:
A Nostro account is maintained by an Indian Bank in the foreign countries.
VOSTRO Account:
Vostro account is maintained by a foreign bank in India with their corresponding bank.
IMPS:

• Immediate Payment Service.


• It is an instant inter bank electronic fund transfer service through mobile phones. Both the customers must have MMID (Mobile Money Identifier Number).


• For this service, we don’t need any GPS-enabled cell phones.

BCBS:
Basel Committee on Banking Supervision is an institution created by the Central Bank governors of the Group of Ten nations.
LIBOR:

• London Inter-Bank Offered Rate.


• An interest rate at which banks can borrow funds, in marketable size, from other banks in the London inter bank market.

Asset Management Companies:

• A company that invests its clients pooled fund into securities that match its declared financial objectives.


• Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies.


• These companies earn income by charging service fees to their clients.

CASA:

• CASA stands for Current Account Savings Account.


• The ratio shows how much deposit a bank has in the form of current and saving account deposits in the total deposit.


• A higher CASA ratio means better operating efficiency of the bank because on current account there is no interest payable whereas on savings account a tiny 3.5% interest is payable by the bank.


• CASA ratio shows how much of the deposit of the bank comes from the current and savings deposit.

KYC:

• KYC is an acronym for Know your Customer.


• It is a term used for customer identification process.


• It involves making reasonable efforts to determine identity and beneficial ownership of accounts which helps the banks to manage their risks prudently.


• The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.


• KYC has two components -Identity and Address. While identity remains the same, the address may change and hence the banks are required to periodically update their records.

Base Rate:

• It is the minimum interest rate of a Bank below which it cannot lend, except for DRI advances, loans to bank's own employees and loan to banks' depositors against their own deposits. (i.e. cases allowed by RBI).


• Now, it is decided by MCLR i.e. Marginal Cost of Funds based Lending Rate.

Marginal Cost of funds-based Lending Rate (MCLR):

• RBI announced that from 1st April 2016, all banks will move to the marginal cost of funds-based lending approach for determining their respective base rates.


• The marginal cost of funds will comprise marginal cost of borrowings & return on net worth.

Core Banking Solutions:

• Core (Centralized Online Real-time Exchange) banking Solution is the centralized banking platform where total bank’s operations are controlled and run from a centralized hub.


• CBS means application of computer technology to various banking functions.

Special Drawing Rights (SDRs) :
Loans refer to a debt provided by a financial institution for a particular period. Advances are the funds provided by the banks, which needs to be payable within one year.
Different Types of Advances are :

• Cash credit


• Overdraft


• Purchase and discounting of bills of exchange

Cash credit :

• Under this system, a limit, called the credit limit is specified by the bank.


• A borrower is entitled to borrow upto that limit. It is granted against the security of tangible assets or guarantee.


• The borrower can withdraw money, any number of times upto that limit.


• The Interest rate is charged on the actual amount withdrawn and for the period such amount is drawn.

Overdraft :

• An overdraft is a facility granted by the Bank to a current account holder enabling an enterprise to carry out debit transactions even when the amount available on the account is insufficient, and up to a predefined maximum amount agreed upon by the Bank and the customer.


• What this actually means is that when granting an overdraft facility, you can withdraw cash at a branch, issue cheques or transfers, even when your account balance is equal to or below zero on the date of the transaction.


• You can carry out as many transactions as you like and place your account in a debit position, up to the limit of the maximum amount authorized by the Bank.

Purchase and Discounting of Bills of Exchange:

• The bank provides the customers with the facility of purchasing and discounting their bills receivable.


• The bank permits the customer to discount his bills receivable and have the value of the bills credited to his account.


• The bank charges discounting charges on the face value of the bills.


• It waits until the maturity of the bill and presents it on the due date to the drawee for payment.

Types of Loans and Advances:
The loans and advances are divided on the basis of:

• On the Basis of Object or Purpose


• On the Basis of Time


• On the Basis of Security

On the Basis of Object or Purpose:
Commercial Loans: This loan is taken to meet short term requirement of capital e.g., working capital.
Consumer Loan: This loan is taken to finance household goods like fridge, T.V., scooter etc.
Agricultural Loan: Such a loan is taken by the farmers to meet their short term requirements like buying seeds, fertilizers, insecticides etc.
On the Basis of Time:
Short Term Loan:
Such a loan is taken for a period of less than one year.
Medium Term Loan: Such a loan is taken for a period ranging from 1 year to 3 years.
Long Term Loan: Such a loan is taken to meet long-term requirements from 3 years to 20 years or more.
On the Basis of Security:
Secured Loan: Banking Regulation Act, 1949, defines a ‘secured loan or advance’ as a loan or advance, made on the security of assets, the market value of which is not at any time less than the amount of such loan or advance.
Unsecured Loans: Such a loan is granted without any security. According to Sec. 5 (a) of the above Act an unsecured loan or advance means a loan or advance not so secured.
Hypothecation:
Banker has right over goods but physical possession of goods is not with him, e.g. Car Loan, Vehicle loan, CC Limit, Book Debts, Stock / Inventory.
Hypothecation creates a transfer of interest in favour of hypothecate (Bank).
It creates a charge in or upon any movable property, existing or future, created by the borrower in favor of a secured creditor (Bank) without delivery of possession.
Pledge:

• Banker has right over goods as well as their physical possession.


• In case of non-payment, Bank has the right to sell.


• e.g. marketable securities like shares, Gold

Mortgage:
When an immovable property, the security is created by way of Mortgage; e.g. for Home Loan, Loan against Property

Liabilities of the Banks :

• Authorized capital


• Issued capital


• Subscribed capital


• Paid-up-capital


• Reserve fund


• Deposits Borrowings from other banks


• Bills payable

Assets of the Banks :

• Cash


• Money at call and short notice


• Bills discounted


• Bills for collection


• Investments


• Loans and advances


• Fixed assets

Functions of Commercial Banks :

• Primary Functions


• Secondary Functions

Primary Functions :

• Acceptance of Deposits Advancing Loans & Advances


• Creation of Credit


• Promote the Use of Cheques


• Remittance of Funds

Secondary Functions:

• Collection and Payment of Credit Instruments


• Purchase and Sale of Securities


• Collection of Dividends on Shares Income-tax Consultancy

General Utility Functions:

• Locker Facility


• Credit Cards


• Letter of Credit


• Underwriting Securities


• Accepting Bills of Exchange


• Merchant Banking

Inflation:
The rise in the prices of goods or service in an economy over a certain period of time is known as inflation
Types:

• Wage inflation


• Price power inflation


• Cost-push inflation


• Sectorial inflation


• Stagflation


• Mild inflation


• Hyper-inflation

IFSC (Indian Financial System Code):

• Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system.


• This is an 11-digit code with the first 4 alpha characters representing the bank, the 5th character is 0 (zero).


• The last 6 characters representing the bank branch.

For ex: PNBN0014976:
a) First 4 -character PNBN – refers to Punjab National Bank.
b) 0 is a control number.
c) last six characters (014976) represents the PNB branch kurshi Road, Lucknow.
MICR –Magnetic ink character Recognition:

• MICR is 9-digit numeric code that uniquely identifies a bank branch participating in electronic clearing scheme.
  
• Used to identify the location of a bank branch.


• City (3) Bank (3) Branch (3)


• The MICR code is allotted to a bank branch is printed on the MICR band of cheques.


• It is used for electronic credit system.

SWIFT Code:

• Society for World wide Inter bank financial tele-communication
  
• India was 74th Nation to join SWIFT Network.


• SWIFT Code is a standard format of bank Identifier code.


• This code is used particularly in International transfer of money between banks.


• SWIFT Code consist 8 or 11 character when code is 8 digit, it is referred to primary office 4 –bank code 2 – country code 2 – location code 3 – branch code (optional)

The scheme of reverse mortgage has been introduced for the benefit of senior citizens owning a house but having inadequate income to meet their needs.
Some important features of reverse mortgage are:
a) A home owner who is above 60 years of age is eligible for reverse mortgage loan. It allows him to turn the equity in his home into one lump sum or periodic payments mutually agreed by the borrower and the banker.
b) NO REPAYMENT is required as long as the borrower lives, Borrower should pay all taxes relating to the house and maintain the property as his primary residence.
c) The amount of loan is based on several factors:

• Borrower’s age


• Value of the property


• Current interest rates


• The specific plan is chosen.


• As per the scheme formulated by the National Housing Bank (NHB), the maximum period of the loan period is 15 years.


• The residual life of the property should be at least 20 years.


• Where the borrower lives longer than 15 years, periodic payments will not be made by the lender.


• However, the borrower can continue to occupy.